Background

In March, the USCCB and CRS welcomed President Bush's announcement of a new "Millennium Challenge Account"(MCA) that would increase annual development aid funding by 50 percent, or to $5 billion, by the year 2006. The Administration established three criteria for determining country eligibility for MCA funds (just rule, economic freedom, and investment in people).

In response to this announcement, the USCCB and CRS submitted complementary technical papers recommending that the Administration's three criteria for determining eligibility for MCA funds be applied in a two-phase process that emphasizes protection of human rights, anti-corruption standards and a participatory approach (see "Millennium Challenge Account: A Proposed Conceptual Approach for Eligibility" and "Improving Development Effectiveness: Recommendations for the Millennium Challenge Account"). In November, the Administration further defined the eligibility and implementation process by introducing sixteen performance indicators which correlate to the three eligibility criteria, and announcing that middle-income, and other non-International Development Association (IDA) countries would be eligible for MCA funds.

USCCB and CRS Position:

The MCA has an opportunity to forge strong links with existing development programs and could strengthen coherence and complementarily in the US approach to foreign assistance. While we commend the additional resources and are pleased that plans for this new program are advancing, the USCCB and CRS have several concerns and recommendations about the administration's proposal, which were expressed in a joint letter sent to the Administration in December 2002:

• the Administration's decision to include middle-income and other non-International Development Assistance (IDA) countries after the third year could draw funds away from very poor nations unable to meet development needs through other means.
  
  
• the 16 indicators may be too restrictive and may reduce eligibility to only a few, mostly small, countries. There are a substantial number of very poor countries in Africa and elsewhere that may fall short of the administration's qualifying standards, even though they are able to use aid funds effectively, and have promising programs that address development needs.
  
  
• the large majority of very poor countries in Africa will not likely be eligible for MCA funding, and since U.S. aid funds available to these countries has been extremely limited in recent years, it is important that funding for poor countries in Africa which are not eligible for the MCA be increased above the current levels by at least $1 billion (above new funding for global health – see Global Health backgrounder) to finance critical poverty reduction programs such as education, water and sanitation, and small-farm development.
  
  
• the recent MCA announcement did not adequately emphasize engaging civil society or establishing mechanisms to facilitate broader participation, both of which are essential to improving the effectiveness of development programs.

Action Requested:

• support authorization of an MCA in FY04 which
  
  
  • provides MCA funding to those countries that demonstrate the greatest need, protect human rights, comply with anti-corruption standards, and have credible programs for combating poverty. Proposals to include middle-income countries in FY06 may further restrict the funds available to poor countries
    
    
  • emphasizes engaging civil society in designing and implementing development programs;
  
  
• support an increase above current levels of at least $1 billion in development aid for poor countries in Africa which do not qualify for the MCA, but have critical development needs;
  
  
• support a strong role for the MCA to engage civil society in designing and implementing development programs. The MCA should be implemented in a manner that supports national anti-poverty programs developed with civil society.

Resources

USCCB and CRS letter to OMB Director Mitchell Daniels, Under Secretary of State Alan Larson, Under Secretary of Treasury John Taylor and Deputy Assistant to the President R. Edson, (December 24, 2002)

"Millennium Challenge Account: A Proposed Conceptual Approach for Eligibility," USCCB White Paper, August 2002

"Improving Development Effectiveness: Recommendations for the Millennium Challenge Account," CRS White Paper, June 2002


For Further Information:
Kelly A. Hicks, 202 541-3153 (ph), 202 541-3339 (fax) khicks@usccb.org;
Gerald Flood, 202 541-3167 (ph), 202 -541-3339 (fax) gflood@usccb.org;
Kathy Brown, 410 951-7232, (ph), 410 234-2987 (fax) kbrown@catholicrelief.org

Email us at sdwpmail@usccb.org
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